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Thursday, June 19, 2014

The latest trend in Corporate America to avoid paying taxes to
Uncle Sam is to acquire or merge with a company headquartered in
corporate-tax friendly countries, allowing them to and relocate the U.S. headquarters overseas to
that country. In a sense, U.S. corporations are acquiring tax
havens.

The latest to do this is Medtronic, a medical device maker
currently headquartered in Minneapolis, Minnesota, USA. The tax
haven they are acquiring is Covidien, also a medical device maker but
headquartered in Dublin, Ireland. Ireland's top income tax rate for
corporations is 12%, significantly less than the United States' 35%
top income tax rate for corporations.

Guess where the headquarters of Medtronic will be after the
acquisition? It's already decided. No surprise, it will be in
Dublin, according to Medtronic's press release. That means the new
Medronic will likely funnel all profits into Dublin and keep it out
of the U.S.

Now, Medtronic did say in its press release that they will commit
an additional $10 billion in technology investments over the next 10
years. Nevertheless, billions of dollars in overseas profits will
not be introduced to the U.S. economy.

In fact, Medtronic is already withholding overseas profits from
the U.S. economy. On page 12 of its 2013 annual report, they
disclosed that "repatriation
of certain earnings of subsidiaries outside the U.S. may result in
substantial U.S. tax cost." The way I translate that is they have no plans to repatriate overseas profits under penalty of the Internal
Revenue Code.

This
acquisition is just the latest example. The trend has already
started. The Internal Revenue Code is essentially causing the job creators to leave the U.S. The best way to stop that is to repeal the Internal
Revenue Code.

The
FairTax proposal (H.R. 25) will do just that – repeal income taxes
not only for corporations but also individuals and replace the
revenue with a consumption tax. With corporate income taxes no more,
global companies would be able to freely move their overseas profits to the
U.S. tax free. With more money in U.S. banks, there would be more
money to loan. The more money borrowed in the U.S., the more money spent in the U.S.,
the more jobs created in the U.S.
For more information about the FairTax, visit the official FairTax website at http://www.fairtax.org.